When asked, “Why don’t flash loans require collateral?”
I usually answer like this: The borrowed funds and fees must be repaid to the protocol before the same transaction ends; otherwise, the entire transaction is reverted, as if it had never happened. Flash loans can work without collateral because of transaction atomicity: the transaction either succeeds in full or is rolled back in full, so the borrowed funds can’t be taken away without being repaid.
$AAVE 157.36 (+2.06%)
Anything to add? Let’s chat in the comments.
I usually answer like this: The borrowed funds and fees must be repaid to the protocol before the same transaction ends; otherwise, the entire transaction is reverted, as if it had never happened. Flash loans can work without collateral because of transaction atomicity: the transaction either succeeds in full or is rolled back in full, so the borrowed funds can’t be taken away without being repaid.
$AAVE 157.36 (+2.06%)
Anything to add? Let’s chat in the comments.